01.20.11

According to Communications Daily, it appears that LightSquared’s request for the FCC to approve its revised business plan “isn’t expected to be taken up right away”, and the FCC’s forthcoming order related to the July 2010 MSS spectrum NPRM will not propose a Further NPRM to deal with the issues raised in the Notice of Inquiry (i.e. relaxation of the ATC gating criteria) at this point in time.

Today’s T-Mobile USA strategy presentation also poured cold water on expectations that T-Mobile has a pressing need to acquire more spectrum, with the company stating that it would not need additional spectrum until 2014. Interestingly, T-Mobile also stated that it expected demand to grow at a CAGR of 60% p.a., drastically lower than the 93% p.a. growth in the FCC’s October 2010 Mobile Broadband Spectrum Forecast (to put this into perspective it would mean data demand increasing by a factor of 6.5 times between 2010 and 2014, not 14 times as the FCC model assumes, completely eliminating the need for any additional spectrum at all in 2014 under the FCC’s calculations). This lack of urgency will allow T-Mobile to run a pretty effective Dutch auction between Clearwire and LightSquared, to see who is prepared to offer the best deal, as both companies get increasingly desperate to secure a partnership.

It is also quite striking that even though T-Mobile is still a potential buyer of spectrum from Clearwire (and would presumably look to buy 40MHz of national spectrum), the amount that could be raised from Clearwire’s spectrum sale is stated as “up to $2 billion“, implying that T-Mobile would be prepared to pay no more than about $0.17 per MHzPOP for Clearwire’s spectrum. Although, as I’ve pointed out before, there are numerous differences that need to be taken into account in drawing comparisons with LightSquared’s 40MHz of L-band ATC spectrum, anything even remotely close to a $2B valuation for LightSquared would be disastrous for Harbinger, given it has contributed “$2.9 billion of assets” to LightSquared and the $850M secured credit facility that closed in October 2010 would be first in line for proceeds from any asset sale.

This leaves LightSquared hanging on the telephone waiting for positive news from both the FCC and T-Mobile. It wouldn’t be surprising if the two were closely connected, because T-Mobile would presumably want the flexibility to offer terrestrial-only service in order for it to invest, and the FCC wouldn’t want to stick its neck out for LightSquared unless it was sure of the company’s viability. In the interim, it will be interesting to see if LightSquared follows through on its suggestion to the NTIA that it “requires quick favorable action [on its FCC request] so that we may continue to roll out our network” or whether it continues to move forward with network deployment so as to meet its original plan to have “a commercial launch before the third quarter of 2011 providing service to up to 9 million POPs”. However, as the song suggested “If I don’t get your call then everything goes wrong…”